What does the seemingly ever-growing portfolio of ‘as a Service’ solutions in the channel mean for customers and resellers alike? Tim Mercer, CEO of cloud specialist Vapour, explores…
The growth of ‘as a Service’ — or subscription model — solutions has definitely risen over the years. And with benefits for both the vendor and customer, I don’t see this trend slowing.
While software products have long been offered on a manageable and supported pay-per-month basis, we’ve seen more and more provisions come to market, including Disaster Recovery as a Service (DRaaS), Firewalls as a Service (FaaS), and complete Technology as a Service (TaaS) packages with ready-to-go hardware, firmware, and software configured to a company’s exact requirements.
There are benefits for supplier and customer alike.
Resellers are attracted to the recurring revenue that comes from a typically longer-term contract, which also offers the opportunity to develop a deeper customer relationship. Nurtured effectively, this often leads to strong customer retention rates, not to mention upsell opportunities.
From the customer’s point of view, finance teams are happy because they know exactly how much they’ll spend on the solution, per month, over a defined term. Cash is king after all, and ‘as a service’ offerings keep that cash in the business. Budgeting simplicity aside, organisations also often benefit from value added expertise — the service element — that isn’t necessarily a given when it comes to procuring disparate tech products. This depends on the quality of the service provider, of course.
It would be easy to think you can have ‘Everything as a Service’ now, because there are so many new offerings coming to market all the time. Let’s not forget though, that this concept has actually been around for some time. We only have to cast our minds back to the growth of solutions like ‘managed print’ (in an admittedly different market), and we soon see that the benefits of service-led contracts with a manageable monthly spend have been widely understood for years. The exciting thing, however, is just where this model could take the channel.
At Vapour, we have a 96% recurring revenue rate, which shows just how important ‘as a Service’ solutions are to our customers and business. And that close-working rapport with our client base actually drives our ongoing innovation roadmap forward, because we don’t believe in introducing cloud solutions for solutions’ sake. Customers talk to us because we feel like an extension of their team, not an arms-length supplier, and that ‘sticky’ relationship strengthens our financial performance and our relevance in the market.
‘Firewalls as a Service’, or managed firewalls, are a hot topic for us right now, for instance. And that’s come from multiple conversations with clients, where we know this would ease security, performance, productivity, agility, and financial pressures within their organisations — almost irrespective of sector.
First of all, it’s important to understand what you’re going to offer, why, and how you will support it. As is always the case, jumping on a bandwagon is risky. It needs to fit the reseller’s wider proposition, be marketed effectively, and be supported by people with the expertise to deliver the solution, for maximum customer benefit. This is a crowded market, don’t forget, so authenticity, and some degree of ‘stand out’ quality, is important.
Secondly, there are financial considerations. While many start-up tech firms have offered subscription model solutions since day one, it is comparatively much harder for existing resellers to transition to a full ‘as a Service’ offering — particularly from a cashflow point of view.
If a firm is used to selling hardware on a lease, for example, with a defined upfront payment, that’s cash in the business, on day one. So, while the recurring revenue benefits of ‘as a Service’ contracts are plentiful long-term, it could create some shorter-term financial pressures.
Our consumption of ‘as a Service’ solutions has risen in both our professional and personal lives, and I think this is a trend that’s here to stay. But as I alluded to above, the market is becoming very ‘busy’ with seemingly endless ‘XaaS’ offerings. That’s why I think the next notable shift will be a move to ‘wrapped’ or bundled solutions that include more commodity-like products, such as lease lines, included for free.
Competing on the basis of price alone is risky, so I think we will see expertise-rich resellers differentiate themselves according to the level of added value they can offer. For example, we deliver our consultancy expertise — decades of combined engineering experience — as standard on so many of our customer projects, because we feel so ingrained and invested in their businesses. This is something that many other resellers can’t touch. As is often the case, I therefore think tech players need to think carefully about where their ‘as a Service’ proposition(s) will benefit them and customers alike.
